Four years ago, on August 16, President Biden signed the Inflation Reduction Act into law. Lawmakers promised that letting Medicare set drug prices would save taxpayers more than $100 billion over a decade.
New research suggests the IRA may accomplish the opposite in the long run.
A study by University of Chicago economist Tomas Philipson and his colleagues estimates that the law’s price controls could raise average lifetime prices for the first 25 medicines selected for price-setting by 19%.
How is that possible? Competition—or a lack thereof. Cutting the revenue a brand-name drug generates today can make its market less attractive to generic and biosimilar manufacturers tomorrow. Fewer competitors after the brand loses exclusivity can mean higher prices for years to come.
